25 August 2006

Why I don't like Kyoto

In response to a comment on a previous post, I will elaborate on my opposition to the Kyoto Protocol, and explain why I think Climate Stability Bonds could do a better job.

Like most people on the planet I don’t really know what’s going on. As far as I can tell the case that the climate is changing faster than ever before is strong and growing stronger. It is the speed of change, not necessarily the end point of the change, that is of concern: it’s changing too fast for many of the earth’s species and ourselves to adapt.

It also looks increasingly as though there is as strong causal link between anthropogenic greenhouse gas emissions and climate change. Proof is of course lacking, but the stakes are too high to wait for it. Accepting this, and even accepting that anthropogenic emissions of greenhouse gases including CO2 are the main cause of climate change, I still think Kyoto is flawed. These are my reasons:

1. Reducing anthropogenic greenhouse gases might not be the best way of reducing the concentration of greenhouse gases in the atmosphere;

2. Reducing the concentration of greenhouse gases in the atmosphere might not be the best way of preventing or mitigating climate change;

3. Preventing climate change might not be the best way of preventing the worst effects of climate-induced catastrophe.

A Climate Stability Bond regime would be more adaptive than Kyoto. Right now it certainly looks as though capping greenhouse gas emissions is the best way of preventing or mitigating climate change. But our knowledge of the scientific relationships is growing all the time.

However, even assuming that capping anthropogenic greenhouse gas emissions is consistently found to be the best way of averting climate change; even then I still think Kyoto is deeply flawed. How would a Climate Stability Bond be better in those circumstances? Holders of Climate Reduction Bonds would still target anthropogenic greenhouse gases in a similar fashion to Kyoto, but they would have strong incentives to do so more efficiently. They would want and would have wider scope for action. For example, they wouldn't be bound by political correctness or realpolitik of the sort that exempts some countries that emit huge quantities of greenhouse gases from any disciplines at all. They would simply buy these regimes off or otherwise undermine opposition to the disciplines. And this brings me to another important point: the presentational aspects. Kyoto doesn't focus on a desirable outcome: it's focused on processes and activities. So it is now so politicised and its money flows so unpalatable that it is seen as an imposition; in the rich countries it's seen as an imposition by the greenies on everyone else, and in the poor countries it's seen as an imposition by the rich countries on them. Kyoto means huge upfront costs for a very small payoff well in the future. So large parts of the world disagree with it, or are totally exempt from it. A triumph for the bureaucrats but a tragedy for the planet. In times of financial stress, or slowdown, everyone will repeat the George Bush and Tony Blair line: "I'm not going to sign onto anything that involves economic sacrifice."

Now what I am entirely focussed on here is the outcome - and this excludes justice, morality, the historical record, or the venalities of politicians. Unfortunately Kyoto, being a political construct, is I think so compromised that even its most ardent advocates will agree that it's ineffectual. And there's little argument that it's going to be ruinously expensive. They justify it as a first step, but that step is unlikely ever to be taken. (As distinct from being talked about, recommended and embodied in law.)

A bond regime would target an outcome that people could understand, empathise with and support, and that would entail taxpayer spending only when it had been achieved. So even if we took reducing anthropogenic greenhouse gases as an end in itself (which I certainly don't); even then Climate Stability Bonds would be more acceptable as well as more efficient than Kyoto.

I have said this dogmatically to save time, but I am ready to be convinced otherwise. In a way I hope I am wrong and that Kyoto will avert a calamity. It's certainly got more traction than Climate Stability Bonds at the moment.

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Social Policy Bonds

See the Social Policy Bonds website for overviews and links to articles, papers, news and more about Social Policy Bonds. Click on the image below to download a 2400-word article, published by the Institute of Economic Affairs, London.

Social Policy Bonds in 2400 words

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Social Policy Bonds in the media

9 October 2015: An article by Greg Bearup on the genesis of the Social Policy Bond idea, and application of a version of it in Australia appears in the Weekend Australian Magazine. (The article can also be downloaded as a pdf from here.)

October 2013: Professor Robert Shiller of Yale University, is named as one of the three winners of the 2013 Nobel Prize in Economics. His Nobel Prize lecture (pdf) delivered on 8 December, mentions Social Policy Bonds. Professor Shiller has for many years encouraged my work on Social Policy Bonds, beginning in late 1996 when he sent me this letter.

3 May 2012: An audio talk by Nobel Prize winner Professor Robert Shiller at the London School of Economics, in which Social Policy Bonds are briefly mentioned, is available here.